Rogers is Buying Shaw, What Does That Mean For You?
As you have likely heard by now, on March 15th Rogers agreed to a mammoth deal that would see them acquire Shaw Communications for $26 billion. This monster transaction would create the second-biggest telecommunications company in the country, leapfrogging Telus to challenge Bell for the number one spot.
The deal would be the second biggest in Canadian telecom history, right after Bell spinning off its stake in Nortel Networks Corp. in 2000, a move valued at $88.7 billion. The merger didn’t come as a total shock, there were whispers for years of the possibility, and now it looks like it has finally come to fruition.
Pending Approval
That is, of course, if the deal is given the green light. The transaction requires shareholder approval and is subject to other standard closing conditions and approvals from Canadian regulators. The expectation is that everything will be made official in the first half of 2022. There is little in the way of overlap between the Shaw and Rogers cable and Internet businesses as they operate in Western and Eastern Canada, respectively. The reality is, the deal is likely to go through. While regulators might prefer the companies remain separate, the general belief is there is little they can do to block it.
With all these big numbers flying around, investors are understandably excited. Following the announcement, Shaw shares jumped 42% at the market open. There’s also the possibility of a wave of employment opportunities as Shaw CEO Brad Shaw promised Alberta would be creating 1,800 jobs as a result. Of course, that number doesn’t reflect the possible layoffs to happen as a result of the merger, something both parties have declined to comment on. The biggest question surrounding this deal, though, is one that has a lot of people sweating.
What Does This Mean for Consumers?
Honestly, probably nothing good. This deal puts Rogers in a power position to flex its muscle on the market. As a result, consumers are rightfully worried about what this could mean for the prices they are paying. Freedom Mobile, owned by Shaw, has been able to offer somewhat cheaper options than the ‘Big 3’ (Rogers, Bell and Telus), but with Rogers taking over, those prices will undoubtedly rise. While combining the carriers’ services will strengthen the 5G network, it will come at a price, and consumers will foot the bill.Prices are expected to rise for Canadian consumers. With a major player like Shaw out of the race, why wouldn’t they? At the end of the day, a big brand like Rogers is mainly concerned with how much money they can bring in. The ‘Big 3’ eliminates another competitor so they can boost prices and increase their profits, the motivation is pretty straightforward.
It’s worth noting that while Freedom Mobile customers have been promised a 3-year price freeze, there has been no mention of anything regarding Shaw Internet customers. The writing is on the wall that prices are about to climb. While mobile customers may be afforded the luxury of time, it would appear the increase will be sooner rather than later for Internet users. Canadians are already paying more for cell phone and Internet services than most other countries in the world, and one of the ‘big guys’ eliminating a competitor won’t be doing anything to change that unfortunate truth any time soon.
Bad News for Rural Customers
The locations primed to be the most adversely affected are the rural markets and under-serviced areas. Many rural markets have only one provider, so there is little incentive to invest in bettering that service and lowering prices. Rogers has promised some limited rural buildout funding to help boost service in specific areas in the immediate future, but that may be just a plan to “buy some support” for the impending merger according to Matthew Hatfield, Campaigns Director at OpenMedia, a non-profit advocacy organization. Unfortunately for consumers, it locks them into a single provider that many people in rural areas already live with.
Lousy Internet and cell phone coverage has plagued rural areas for years. Consumers in those areas have long been calling for an expansion of providers available to them, so they would be afforded the choice of getting on board with a company that can give them a more reliable option. With Rogers swallowing up a competitor, that spells bad news for any hope of a more diverse landscape for consumers.
The Benefits of Smaller ISPs
While it seems as though it is only a matter of time before we see increased Internet prices by the large incumbent carriers, one shining light remains in the market: small competitive ISPs.
To foster competition in the market, the Canadian Radio-television and Telecommunications Commission (CRTC) mandates that large incumbents sell wholesale access to their networks to smaller competitive Internet Service Providers (ISPs), such as Q Wave (which has partnered with Spot Power to offer Cable and DSL Internet plans across Alberta). This market structure is important for consumers as competitive ISPs typically retail their Internet plans at more reasonable prices.
In 2019, the CRTC drastically lowered the wholesale rates incumbents could charge smaller competitors for network access. While the incumbents have challenged the reduced wholesale rates to the Federal Court of appeal and the Supreme Court of Canada, causing an almost 2-year delay in their implementation, both challenges have been rejected.
The wait is almost over, and fortunately, the possible merger between Shaw and Rogers will have no impact on the CRTC’s mandated wholesale rates. So if you have shopped around for a more affordable Cable or DSL Internet plan with a small ISP, you can rest easy knowing that the $26 Billion merger won’t negatively impact your current plan.
If you haven’t shopped around for an alternative to the ‘Big Guys,’ maybe now is the time.
What Can You Do?
The Canada Competition Bureau, a government-run organization designed to protect consumers and businesses from anti-competitive activity, recently revealed they are receiving a high volume of online questions and feedback regarding the announcement of the Rogers/Shaw deal. The feedback was so overwhelming it prompted the Bureau to post a note on their website that they will be reviewing the proposed transaction. This indicates that the government is, at the very least, listening to consumers’ concerns regarding the matter. You can share your opinion with them through their online form here.
Rogers will soon have the ability to set their prices high and keep them that way, and Telus and Bell are likely to follow. If you’re a customer with one of the ‘Big 3’, now is the time to make a move and save yourself from the impending price hike.
With Shaw losing their Alberta roots, you can keep your Internet local by switching over to Spot Power. We provide an alternative to the big guys and offer competitive, affordable prices. Our mission is to provide consumers with choice in Western Canada’s Internet and utilities market. Regardless of what your needs are, we have a plan that will work for you.